1. Field of the Invention
This invention pertains to an integrated business process and system for remotely managing business and employee administration services. More particularly, this invention relates to a business process and system to allow remote outsourcing of human resource and other business and employee administration functions.
2. Description of the Related Art
Administering employee benefits is a time consuming, complicated and costly burden for most small and medium size companies. Smaller companies typically do not have the expertise or scale to effectively manage employee administration and human resource functions such as payroll, tax filing, health benefits, retirement plans, workers' compensation and other business insurance, or human resources compliance more generally. In fact, employee benefits administration diverts a significant amount of management time from the core strategic or revenue producing activities of the enterprise. In addition, there are compliance risks associated with being an employer that are significant for smaller companies that don't have the resources to understand their ever-changing and complex regulatory responsibilities.
In addition, smaller companies are usually unable to hire qualified personnel with the expertise to manage the human resource and employee administration activities for them effectively. Not only do employers and employees both become frustrated with the amount of time required to be spent on these lower-value activities, but employers are often not sufficiently well-informed regarding their responsibilities as employers that are imposed by an ever-increasing and complicated set of employment statutes and regulations. Companies that remain unwittingly out of compliance can be subject to serious retroactive sanctions.
Because these activities are essential, although rarely strategic, human resource and employee administration processes are ideal candidates for outsourcing to companies that make those activities their strategic work—that is, companies that can perform such services cheaper, better, and faster than their clients. Outsourcing non-strategic activities has been popular among larger companies for many years. Outsourcing is becoming increasingly popular among smaller businesses as the benefits of focusing on a company's competitive work become more clear and as outsourcing providers increasingly take aim at the smaller company market.
In a parallel development, the Internet has emerged as a mass communications and commerce medium enabling millions of people and businesses worldwide to share information and conduct business electronically. International Data Corporation of Framingham, Mass., USA as of 1999 has predicted that the number of Internet users will grow from 100 million in 1998 to 320 million in 2002. In addition to its emergence as a mass communications medium, the Internet has features and functions that are unavailable in traditional media. These features and functions include e-mail and immediate, 24-hour access to hundreds of thousands of companies from around the world. Along with the impressive overall growth of the Internet, business-to-business usage is also growing rapidly, as businesses are increasingly leveraging the Internet's ability to reach customers globally, deliver personalized content and services; and open new distribution channels. While consumer buying on the Internet will likely grow over 300% over the next three years, the business-to-business market is viewed by many as the area that will benefit the most from revolutionary improvements enabled by the Internet. Industry sources predict that, over the next few years, business-to-business transactions will likely account for nearly 90% of all Internet transactions.
The emergence of Internet technology enables the integration of multiple and complex elements in the employee administration activity flow. The Internet technology allows for instant deployment without any requirement to invest in technology other than a Web browser. Many of the traditional administrative service providers also have initiatives in various stages of development to provide Web-based information and access for their clients. The sector has also spawned Web-based outsourcers providing services ranging from employee benefits management to payroll management to travel management.
Given the attractiveness of outsourcing, particularly for non-core functions such as employee administration and human resources, various companies are already involved in the provision of administrative services, and some of these companies also provide such services via the Internet. These companies include (a) non-integrated services providers, such as payroll processing companies and third party administrators (TPAs) for various insurance or financial products, (b) professional employer organizations (PEOs), also known as employee leasing companies, that offer integrated employee administration and human resource services through a co-employment arrangement whereby the employees of client companies also become employees of the PEOs, (c) application service providers that host certain employee administration and human resource applications in a service bureau environment, and (d) human resource integrated system software providers.
Functions provided by non-integrated administrative service providers (both traditional and electronic) include payroll processing, insurance brokerage, workers' compensation claims administration, medical claims administration, and unemployment claims administration. A variety of more specialized and complicated human resources functions are also provided, such as Section 125 Plan Administration (a statutory provision in the U.S.A. tax code to permit payment of employee contributions for benefit plans to be taken from pre-tax finds), COBRA administration (a U.S.A. statutory provision for the temporary continuation of employer group health insurance for employees, when that insurance would otherwise end, enacted as part of the Consolidated Omnibus Budget Reconciliation Act of 1985), 401(k) retirement fund plan administration (a provision of the U.S.A. tax code), and human resource consulting. It should be appreciated that the administration of such plans can become quite complex for a large workforce, and for employers that provide a variety of related plans that are interrelated. While a collection of non-integrated service providers may offer more product choice, they do not possess the desired level of efficiency, accuracy, and functionality. Furthermore, for a typical employer in the target market, the onus of interacting with wide range of service providers, selecting among numerous product offerings, and maintaining these outsource relationships can actually increase the time and cost burden on the employer. While many of these administrative service providers (in particular the payroll companies) have attempted to expand their human resource service offerings for their clients to include other human resource and administrative services, the breadth and functionality of these recent initiatives fall well short of the desired model.
PEOs, by entering into co-employment arrangements with clients, aim to provide employee-administration services to a large number of employees, thereby deriving economies of scale as well as delivering services at a level typically available only to larger corporations. There are over 2 million employees currently under PEO arrangements. The industry is highly fragmented with approximately 2,000 companies, most of which serve a single market or region, leaving companies with offices and employees in different states in a bind. Because workers' compensation insurance arbitrage is a significant source of revenues for PEOs, PEOs have tended to largely target the blue-collar industry segments.
There are certain regulatory questions regarding the definition and responsibilities of the “employer” in a PEO relationship as well as certain detrimental side effects of the co-employment relationship. First, the PEO model requires that there be a shared employer status with the client. In addition, signing on with a PEO requires resetting an employee's wage base to zero for the purposes of calculating federal and state payroll, social security and Medicare taxes. PEOs also generally suffer from adverse selection in group medical care due to a lack of minimum participation requirements during client acquisition process. Moreover, should a company decide to withdraw from a PEO relationship, it may lose its independent workers' compensation modifier and its unemployment rating which could negatively impact that client's insurance and payroll tax costs. Furthermore, in a PEO relationship, small companies subject themselves to larger employer legislation, such as the Family Medical Leave Act of the U.S.A.
From a revenue perspective, PEOs are not permitted by legislation to earn commissions or other income from the sale of third party products and services (e.g. insurance and financial products) to their co-employees. Finally, as a competitive service offering, the PEO industry is small and immature, with most companies struggling with limited technical infrastructure and a manually intensive service delivery model. The industry has also been plagued by well-publicized failures of financially unsound and, in some cases, unscrupulous operations.
As with the non-integrated administrative service providers, certain participants in the PEO industry are in various stages of developing a Web presence. For example, the company called Administaff, Inc. of Kingwood, Tex., USA has an operational Web site at the uniform resource locator (URL) address of www.administaff.com to serve its clients.
Application service providers (ASPs) manage all the hardware, networking equipment, and software for certain employee administration and human resource applications, and allow their customers to access the applications through a Web interface or over a dedicated communications line. One such firm is known as USinternetworking, Inc. (USI), of Annapolis, Md., USA, having a URL Web site at www.usi.net, which delivers via the Internet on a service-bureau basis enterprise applications covering relationship management, electronic commerce, data warehousing, Web site management, human resources and financial management. A Web-enabled engine from Peoplesoft, Inc. of Pleasanton, Calif., USA powers USI's financial management, human resources, benefits administration, and payroll product offerings. Another example is Employease Inc. of Atlanta, Ga., USA, a company that provides human resources (HR) information management over the Internet, and which has a Web site at the URL of www.eease.com, through which it provides an extranet-style service that allows human resource client personnel and the client's vendors, partners and trusted advisors to access employee data on a consistent and controlled platform. Providers such as these would typically target and attract significantly large clients.
Human resource integrated system software providers such as Peoplesoft, Inc.; SAP AG of Walldorf, Germany; Lawson Software of St. Paul, Minn., USA; and Best Software, Inc. of Reston, Va., USA; which offer human resource integrated system packages designed to help manage the payroll and administration functions within companies. There are also user interface systems such as the “iClick” service from Product Technologies Corporation of White Plains, N.Y., USA, which is designed to increase the self-service functionality of human resource integrated systems. These software products are generally designed to operate in larger company environments under control of human resource professionals.
Because many of these service companies outsource their individual services to outside providers, the quotations that are provided to potential clients are necessarily fractured into the various service portions. Further complicating the quotation calculus is the fact that the costs for these services may vary from jurisdiction to jurisdiction. None of these systems has the ability to provide an instantaneous quotation for a whole package of employee benefit services, as specifically identified by the client and in the client's specific jurisdiction.
Accordingly, it would be advantageous to provide a fully integrated employee administration system and human resource outsourcing service that can be accessed via the Internet by either the employer or the employee.
It also would be advantageous to provide a fully integrated employee administration system and human resource outsourcing service that does not require shared employer status with the client company.
It would be further advantageous to provide an Internet-based employee administration system and human resource outsourcing service that can react to information provided by the employee by suggesting actions to be taken and that can carry the subscriber through these actions at a time convenient to the subscriber.